Borders Shareholders Lost, But You Don't Have To

As consumers, we mourn the demise of Borders bookstores. But as investors, we can learn much from the tragic tale.

Borders Group, which went public in 1995, reached a high of about $40 per share in 1998. But in February 2011, the company filed Chapter 11 bankruptcy and on Friday, liquidation began. Its stock now trades at less than 3 cents per share.

It’s a very unhappy ending for shareholders. During bankruptcy, creditors, bondholders and shareholders line up for reimbursement, but often not everyone gets paid. There’s a hierarchy, and common shareholders come last.

So whether the company restructures and emerges from bankruptcy (with a new share class), or liquidates and ultimately goes kaput, existing equity investors are often left with nada.

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